In a poll of 100 hedge funds and hedge funds-of-funds with $900 billion in assets under management, Ernst & Young found that 80% expect incentive fees to go down within two years, and 72% expect management fees to decrease, Dow Jones reports.
At the same time, the hedge funds expect operational costs to increase.
“With such vast amounts of assets under management, the capacity of many funds is under stress, and the ability to trade in the marketplace, with a minimum market footprint, becomes harder and harder,” according to the report. “In light of this, managers have had to rethink their infrastructure and operations in order to cope with these pressures, not simply to ensure scalability, but more importantly, to minimize any drag on performance.”
As far as regulation is concerned, hedge funds are worried about scrutiny of how their holdings are valued, particularly since a number of hedge funds weren’t able recently to honor redemptions or properly calculate net asset values.